Investboy
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Trying to recover from P2P revolution
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Post by Investboy on Jan 19, 2016 16:55:21 GMT
Thanks both. Actually the prices look quite good (high) to me. There is nothing that tempted me as a bargain. There are definitely no bargains for buyers at Buy Now prices. I was very recently looking for new Samsung S4/S5/S6 on eBay. I was tracking every listed item and know the average prices of used and new phones of those models. I've checked cash shop prices and they are off the mark sometimes 50% or more (example below). So either the shop is not selling anything or they are selling it at much lower 'Make Offer' prices. Example: In the valuation document I can see the most expensive Samsung Galaxy S5 Neo for £170, so I assume this is how much they paid to borrower and I assume this is brand new phone. On eBay they list similar/same new Neo for £330 (the official value). That is in line with 50% LTV. But the small problem is that based on my recent experience same phone (or better because Unlocked) averaged or £220. Even now I can Buy Now for £205-£230. So for them to sell quick they need to accept below that lets say £200. The LTV doesn't look that good anymore - 85%. I think remaining difference barely pays 6m interests. This is of course just analysis of one item (one that I'm very familiar with on eBay) and I can't extrapolate it to the whole portfolio. Edit: I've forgotten that eBay also charges 10% commission and PayPal 3%. So the profit gets squeezed even more.
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jimbob
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Post by jimbob on Jan 19, 2016 18:28:06 GMT
Thanks both. Actually the prices look quite good (high) to me. There is nothing that tempted me as a bargain. Example: In the valuation document I can see the most expensive Samsung Galaxy S5 Neo for £170, so I assume this is how much they paid to borrower and I assume this is brand new phone. On eBay they list similar/same new Neo for £330 (the official value). That is in line with 50% LTV. But the small problem is that based on my recent experience same phone (or better because Unlocked) averaged or £220. Even now I can Buy Now for £205-£230. So for them to sell quick they need to accept below that lets say £200. The LTV doesn't look that good anymore - 85%. I think remaining difference barely pays 6m interests. The phone is valued at £170 in the docs, so providing the value is £170 after sales fees then the LTV of the loan is at 50%. Once interest and fees are added in we only need to achieve ~ £100 for the phone. Of course some won't sell - but we will get FMV + the rest for others and a fair portion will be redeemed at an APR of ~ 150% (Figure is rep APR from their site).
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jimbob
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Post by jimbob on Jan 19, 2016 18:32:38 GMT
The new value of the phone doesn't matter at £330 and doesn't affect our LTV at all. What matters is that the Neo can be sold for £170.
The new value of the stuff on the pdf would be ~ £200,000+ I'm guessing or so.
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webwiz
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Post by webwiz on Jan 19, 2016 18:44:21 GMT
Unless I have misunderstood the completed loans which were Buy it Now have all sold at the stated price unless it is crossed out (I could only see one) and on the items for sale by auction it will not accept a bid lower than the starting price, so I don't see how they are selling at much lower prices.
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webwiz
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Post by webwiz on Jan 19, 2016 18:47:10 GMT
You raise some good points. It'd be interesting to know what proportion of the items, are in fact, bought-back by the lenders and which have to be flogged on e-bay/wherever. Ed did give some stats on this forum some months ago if you search for it.
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Investboy
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Post by Investboy on Jan 20, 2016 13:34:16 GMT
The phone is valued at £170 in the docs, so providing the value is £170 after sales fees then the LTV of the loan is at 50%. Once interest and fees are added in we only need to achieve ~ £100 for the phone. Of course some won't sell - but we will get FMV + the rest for others and a fair portion will be redeemed at an APR of ~ 150% (Figure is rep APR from their site). Am I missing something? If the value of the phone is £170 then how much money was lent against it? If this is the valuation from the shop and somebody got £100 or less (to keep LTV in the 50-60% range) than I'm fine with that. But why would someone did such a bad deal? In that case I agree with you. My understanding was that the owner got £170 as the RRP of the phone (Amazon) is about £290. That is LTV of 58%. A "reasonable" deal for borrower. I don't understand what you mean by "interests and fees added". Who adds those and from where? The borrower? In my mind (never used pawn broker before) the scenario is like this: I come to the shop with my brand new S5 Neo. Get £170 for it as a "loan". Never come back for it and the phone becomes pawnbroker's problem and I don't pay any fees or interests. And if indeed the shop paid for it £170 it needs to sell it for : £170 + shipping (£4+) + MT interests/fees (£10+) + eBay fees (£17+)+ PayPal fees (£4+) = ~ £205 to just get the money back, not to mention profit. The new value of the phone doesn't matter at £330 and doesn't affect our LTV at all. What matters is that the Neo can be sold for £170. The new value of the stuff on the pdf would be ~ £200,000+ I'm guessing or so. How it does not matter? If the assumed value by the shop is £330 and £170 was lent against it and you can buy same phone on eBay for £220 it will not be sold for (much) more. And as I showed above for that price there is very little profit if any. Again it's different story if they valued it at £170 and lent only £85-£100 against it to keep LTV in 50% range. But it must not be the case (I hope) because the valuation in the PDF says £170 and this is "our" valuation with LTV 50%. Unless I have misunderstood the completed loans which were Buy it Now have all sold at the stated price unless it is crossed out (I could only see one) and on the items for sale by auction it will not accept a bid lower than the starting price, so I don't see how they are selling at much lower prices. I'm not sure how they do it that they sold used Galaxy S5 for £200 + P&P when I bought brand new for less. But if they can (world is full of chumps) and if they can do it maybe their business model is better than I thought and it works. So to sum up this example: According to MT/TCS 50% LTV of Galaxy S5 Neo is £170. That assumes that RRP is £340 and you can sell it close to that. But they must know better as they have shop on eBay that the realistic price for it is in £230 range, or even on Amazon is below £300. The the LTV is in reality ~74%, and when you add all other costs/fees ect its closer to 90%. I'd be happy if someone can clarify this and show the flaw in my thinking.
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jimbob
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Post by jimbob on Jan 21, 2016 10:43:17 GMT
"I come to the shop with my brand new S5 Neo. Get £170 for it as a "loan". Never come back for it and the phone becomes pawnbroker's problem and I don't pay any fees or interests. And if indeed the shop paid for it £170 it needs to sell it for : £170 + shipping (£4+) + MT interests/fees (£10+) + eBay fees (£17+)+ PayPal fees (£4+) = ~ £205 to just get the money back, not to mention profit. "
The value in the pdf for that phone is £170. The total value of the pdf sums to £100k. The loan figure is £50,000 hence £85 has been in theory lent against the phone.
£85/£170 for the individual phone is what needs to be thought of against the £50k/£100k.
So in theory we need to sell the phone for "(+ shipping (£4+) + MT interests/fees (£10+) + eBay fees (£17+)+ PayPal fees (£4+))" ~ £120 to get back the interest, capital lent out against - and costs of sale on the phone.
Obviously they'll try and get as much as possible for the phone, but in theory £120 is 'enough'.
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Post by pepperpot on Jan 21, 2016 11:20:02 GMT
Err, no, the loan is £100k, not £50k. So the first part of the worked example is in the right ball park, with anything over c£205 being where the profit is. Of course CS's profit also come from the interest charged on the loans in the first place. Not sure what the split would be, 60/40 maybe, 60% coming from the interest? Financial Thing might have a better idea about that area of pawn. (yes, I spelled pawn correctly ) The thing to alleviate fears over values would be to see CS's achieved sales figures for these sort of items, but I doubt we will be privy to that info. I guess there is no harm in asking Ed MoneyThing if we could get some examples of past sales on a few different items? Maybe not to post them on an open forum, but pen an email perhaps?
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jimbob
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Post by jimbob on Jan 21, 2016 11:39:43 GMT
Err, no, the loan is £100k, not £50k. So the first part of the worked example is in the right ball park, with anything over c£205 being where the profit is. Of course CS's profit also come from the interest charged on the loans in the first place. Not sure what the split would be, 60/40 maybe, 60% coming from the interest? Financial Thing might have a better idea about that area of pawn. (yes, I spelled pawn correctly ) The thing to alleviate fears over values would be to see CS's achieved sales figures for these sort of items, but I doubt we will be privy to that info. I guess there is no harm in asking Ed MoneyThing if we could get some examples of past sales on a few different items? Maybe not to post them on an open forum, but pen an email perhaps? Oops ! Ignore everything I wrote... whistles.
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